A bold color choice may make a statement or be a means to meet a corporate need, but fleets that want to maximize their resale returns will stick with white. Photo credit: Ford Motor Co.
Unlike light-duty trucks, which present only a handful of options (such as a two-wheel or four-wheel-drive, additional trim levels, and different bed configurations) that affect potential resale, medium-duty trucks are substantially more complex, with dozens of options to sort through that can impact resale values as much as several thousand dollars per unit.
And as fleets continue to shortcycle their medium-duty trucks, resale value becomes an especially important consideration at the time of vehicle purchase, because a higher sale price in the secondary market means lower depreciation costs — and, consequently, lower total cost of ownership.
So, what should fleet managers consider in their medium-duty truck specs to enhance resale value when the truck is taken out of service?
Keeping Resale in Balance
“The goal that many fleets are trying to achieve is a balance of depreciation, maintenance expense, and the useful life of the upfit or ‘tools,’" said Joe Korn, senior strategic consulting analyst for ARI, a full-service fleet management firm. “It’s the synergy of all these areas that makes a fleet ‘best in class’ and will provide the optimal resale value and overall lowest lifecycle cost.”
Achieving the highest possible resale value also hinges on determining the best replacement cycle for the truck and its application, Korn advised.
“Even trucks built to achieve optimal performance with all the right components from a resale perspective can experience lower-than-expected residuals if the vehicles are kept well past their intended lifecycle,” Korn said. “I could have the best truck in the world, spec it with all the right pieces, but, if I keep it in service too long, the market becomes so washed down that it doesn’t really matter. You’re not going to get that much for the truck. It all matters how long I should keep it and how well I use it.”
1 SPEC’ING WITH RESALE IN MIND
For fleets that run their medium-duties until the “wheels fall off,” resale may not be the highest priority at the time of vehicle purchase. But, for those that intend to replace their trucks every five to seven years or sooner, here are some specification ideas to maximize the truck’s future value:
A diesel engine (above) will tend to net a higher resale value than a gasoline engine. Photo credit: Chrysler
Most Class 4-7 trucks offer only a diesel engine; however, a few models, such as the Ford F-650/F-750 and the Isuzu N-Series, present a gasoline option, designed for low annual mileage applications, with an up-front price savings of about $7,000 to $10,000. So, which engine type performs better from a resale perspective?
“Spec a diesel over a gasoline engine whenever possible and practical,” said Steve Jansen, manager, fleet services and regulatory compliance at Donlen, a full-service fleet management company based in Northbrook, Ill., and wholly owned subsidiary of The Hertz Corporation.
In Class 6-7 trucks, there can be as many as a dozen horsepower/torque ratings to choose from, with a higher up-front price tag (as much as several hundred dollars) the higher the rating. What should fleet managers consider for resale purposes?
Jansen recommended selecting diesel engines with over 230 hp, because the higher ratings can be used for a wider range of applications, expanding the potential pool of customers on the secondary market.
But when choosing horsepower, keep it in perspective, advised Korn.
“You don’t want to put parts in there that are overkill, such as a higher displacement or horsepower engine, just to say that you think you may get a better residual at the end, because you could be spending much more on fuel than you really need. You may get 5-percent more on the residual but will have spent 20-percent more on fuel,” he said.
The key is determining the horsepower/torque “sweet spot” where the truck offers sufficient power for its initial duty cycle while increasing possibilities for future resale, without paying too much up front.